The risks and rewards of ESG focused investing

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Our new Ethical Fund launches on Monday, 29th April 2019, I recorded a webinar explaining how it works, why we expect it to outperform and to answer common questions we've received including some new ones from listeners on the webinar.

In the webinar I explain why all investors should be analysing the risks associated with environmental, societal and governance (ESG) issues. In my view you're only going to see change when executive remuneration is tied to managing these factors. If the CEO of the stocks in your portfolio aren't explaining how they're managing these risks, then they're putting your retirement at risk.

I use the example of ex-National Australia Bank chief Andrew Thorburn recently receiving a golden handshake that didn't include $22m worth of shares. It was a major step forward in only rewarding management for good performance.

There’s further examples of companies such as Dulux that manages its environmental risks well, all the way to executive remuneration being 10-20% based on these factors. Dulux was also spun off from Orica, which is timely and I explain in the webinar why spin offs are a reliable source of outperformance.

Late last year, we seeded the Ethical Portfolio with internal funding, in preparation for the official listing on the ASX in June. And just on Tuesday, the portfolio had its first major win with Dulux receiving a takeover from Japanese paint company Nippon Paint.

Although we wished the deal had been tabled after we officially launched the Fund, it's a good example of the type of high quality business that we seek to own for the long term i.e. a business with strong competitive advantages, unique assets (in this case Dulux's strong brand), and good management. 

The InvestSMART Ethical Share Fund (Managed Fund) is designed to provide investors with a diversified selection of Australian companies that produce growing, sustainable profits at low risk of interruption from the increasing threats associated with Environmental, Social and Governance (ESG) factors. 

If you're interested in investing in our Ethical Share Fund, click here to register your interest and to be notified once the inital offer period opens.